North American Economic Integration

North American Economic Integration

Theory and Practice

Norris C. Clement, Gustavo del Castillo Vera, James Gerber, William A. Kerr, Alan J. MacFayden, Stanford Shedd, Eduardo Zepeda and Diana Alarcón

This highly accessible book explains the theoretical, historical and political background of the North American Free Trade Agreement (NAFTA), its impact and the debates surrounding its existence. In addition the authors provide a brief introduction to the theory of economic integration as well as a succinct overview of the evolution of the global economy, and the institutions that manage it, in the post World War II period.

Chapter 8: NAFTA and Beyond

Norris C. Clement, Gustavo del Castillo Vera, James Gerber, William A. Kerr, Alan J. MacFayden, Stanford Shedd, Eduardo Zepeda and Diana Alarcón

Subjects: business and management, international business, economics and finance, international economics


Page 279  8. NAFTA and Beyond  In previous chapters we developed the theory and history underlying NAFTA's creation. Then we examined the content of the agreement itself and its two side  agreements. Now we turn to the question of how NAFTA is working in practice since its implementation in January 1994 and speculate on where it might go in the  future. Given the complexity of the agreement and its many economic, social and environmental implications, we will limit our discussion to those topics which we  believe have most relevance to the readers.  In the first part of the chapter we look at the ‘Mexican dilemma’ — the special issues presented by Mexico's status as a still developing country (and its consequent  macroeconomic instability) and how this status affects NAFTA. Next we look at NAFTA's evolution during the first three years, as a tool for managing the de facto  integration occurring in the region. In the third section we look ‘beyond NAFTA’ at the possibility for reforming and/or deepening and widening the current agreement.  THE MEXICAN DILEMMA  We have argued that economic integration in North America was well under way before the signing of NAFTA, as indicated by the flows of goods, services and  investments. Given these substantial flows, there was no obvious reason why two developed economies — the United States and Canada — would choose to form a  trade alliance with a developing economy like Mexico. Not only was size a problem (the Canadian and US economies in combination are about twenty...

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